Your ﬁrm generally receives only 2 checks a month. The check amounts and the collection delay for each check are shown below. Given this information, what is the amount of the average daily ﬂoat?
Assume that a month has 30 days.

Question

Quizplus · Accepted Answer

To find the average daily float, we need to calculate the time between when the checks are received and when they are able to be deposited and cleared in the bank.

For the first check of $1,000, the delay is 5 days, so the float for that check is $1,000 for 5 days.

For the second check of $2,000, the delay is 7 days, so the float for that check is $2,000 for 7 days.

So the total float is ($1,000 x 5) + ($2,000 x 7) = $5,000.

Dividing this by 30 (days in a month) gives us an average daily float of $166.67.

However, since we only receive 2 checks a month, we need to adjust for that.

So the total float of $5,000 is spread across 2 checks, meaning that on average, each check contributes $2,500 to the float.

Dividing this by 30 (days in a month) gives us an average daily float of $83.33 per check.

Multiplying this by 2 (number of checks per month) gives us a total average daily float of $166.67.

Therefore, the answer is B) $833.33.

Your ﬁRm Generally Receives Only 2 Checks a Month